Free factsheet: EIS at a glance

Seed Enterprise Investment Scheme

SEIS in a nutshell

Help start-up companies get off the ground and for every £1 you invest, save up to 64p in income and capital gains tax. You also qualify for IHT exemption, potentially saving up to another 40p per £1 you invest.

Goldfinch SEIS Fund

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The Goldfinch SEIS Fund invests in a range of companies developing film, TV and
computer games.

Runaway media successes such as Harry Potter are the ones that
grab people’s attention, but finding them is like looking for a needle in a
haystack. The Goldfinch SEIS Fund aims to generate returns not only if there is
a big hit but also from general production activities which do not depend
solely on the success of the creative work.

Highlights

Portfolio of 5-15 companies
developing film, TV and video games

Investors have access to a diverse range
of revenue streams which don’t depend on a project’s ultimate success – from
script sales to general production activities

The offer

The Goldfinch SEIS
invests in a portfolio of 5-15 companies set up to develop film, TV or video
games. It can also select music, theatre and other entertainment sectors for investment.

The management team avoids very early-stage projects when investing in new content and instead prefers projects based on established intellectual property. For instance, Goldfinch won’t invest before a script is ready, the cast lined up, and a finance plan and full budget in place. All projects need to receive Advance Assurance from HMRC prior to investment and must be viable before SEIS tax relief.

The Goldfinch SEIS fund has a target of £1.25 per £1 invested. Remember, it’s a target and not guaranteed: SEIS funds are higher risk as they invest in the smallest companies.

The manager

Goldfinch has a highly experienced team with strong industry connections, including BAFTA and Oscar winning producers and developers. Goldfinch has advised over 82 SEIS companies and raised over £8.4 million under the SEIS scheme.

Kirsty Bell, founder and MD, has been heavily involved in all aspects of film finance as both a successful film producer and a Chartered Tax Adviser who has spent much of her career at top-ten accountancy firms. This combined expertise has seen her focus on the structuring of film companies and their financing.

Goldfinch sees every project through, acting as an executive producer and advising on distribution. The team is so well established that every week they’re approached with two or three projects. However, Goldfinch expects to reject on average around 90% of these. Goldfinch controls the review process but the final decision is made by the fund manager, Kin Capital. This is more than a rubber-stamp process – one potential investment was rejected as the investee company refused to grant the rights and consents routinely put in place to protect investors’ interests. The due diligence will focus on sales estimates, the track record of the team and ensuring the SEIS funding limit of £150,000 (plus any third-party finance) is sufficient to fund the project.

Examples of portfolio companies

Below are examples of previous or
current investments made by the fund. Please note new investors will be exposed to different
companies.

DLT Entertainment Development
Limited

This was one of the first investments
made by the fund. It produced the TV programme ‘Go 8-Bit’, hosted by comedian
Dara Ó Briain. It’s based on the smash-hit live show of the same name which
debuted at the Edinburgh Fringe Festival in 2014. In April 2016 Goldfinch SEIS
Fund invested in the production company that turned the concept into a TV show.
The first series aired on cable TV channel ‘Dave’ to public and critical acclaim and is now one
of the channel’s five biggest shows. A second and third series have been
commissioned.

DLT
Entertainment Development Limited is currently considering further projects and
is meeting with broadcasters to introduce them to a new TV series with Clive
Anderson as host.

Trapped Nerve Entertainment Limited

Trapped Nerve
Entertainment Ltd is a video games company. It is in the process of creating Q.U.B.E
2, a follow up to the hit video game Q.U.B.E created in 2011 by independent UK
games developer Toxic Games and Trapped Nerve. Q.U.B.E stands for Quick
Understanding of Block Extrusion. The game tests physics, spatial and reasoning
skills in a series of increasingly challenging puzzles involving 3D blocks. The
original was released to solid reviews and sold 350,000 copies (250,000 of which via the
‘Steam’ platform).

Q.U.B.E 2 is
expected to be available on most major platforms, including Sony’s Playstation
4, and will support Sony’s ‘Project Morpheus’, allowing the game to be played
through a Virtual Reality headset and gloves.

Following
investment by the Goldfinch SEIS fund, Q.U.B.E 2 has won various industry
awards, including Best Gameplay, Best VR Game and Indie Game of the Year, along
with positive coverage in the trade press. Goldfinch believe the success of the
original Q.U.B.E game, the growth in the computer games market and the fact
that Q.U.B.E 2 will be virtual reality enabled, significantly reduce the sales
risk when compared to a new unproven game.

George B Film Developments Limited

George B Films
is developing a feature length documentary about footballer George Best. It
includes key footballing moments, insightful interviews and previously unseen footage
of the famous player. The film follows the ups and downs of his life. The
rights of all scripts and property are owned by previous Goldfinch SEIS Fund investors.

The company has
won over Barbara Best (George’s sister) to the project and the movie has the
backing of the George Best foundation (now part of the Mary Peters foundation).

Prior to the
project, the production team produced the successful sporting biopic on golfer Seve Ballesteros, which following its UK release in 2014 has sold
over 110,000 DVDs in the UK. In March 2016 ‘Seve the Movie’ was released in the
USA to wide acclaim.

George B Film
Developments has received multiple offers for UK distribution and is currently concluding
a deal for UK distribution and international sales. Key relationships have been
established with Northern Ireland Screen, Glentoran and Manchester United
(including meetings with MUTV).

Target return

The target return is £1.25
per £1 invested. Remember, it’s an objective and not guaranteed: any SEIS
investment is higher risk as it invests in the smallest companies.

Exit strategy

As media and entertainment is a
predominantly cash-based business, the likely scenario for many of the
investments is cash coming back into the SEIS and being used to fund share
buybacks. In addition, projects can be sold outright to film or TV production
companies and film scripts can be sold on elsewhere. The exit is targeted for
2021 and beyond: this is not guaranteed.

The first Goldfinch SEIS exit is expected to be announced soon.

In November 2017, Goldfinch EIS investors had their first exit. The EIS fund is also run by Kirsty Bell and her team.

Performance

Out of the 82 SEIS companies invested in to date, 30 are
considered by Goldfinch to be trading ahead of expectations, 50 are on target
and two are trading behind.

Whilst
it is possible that any company may fail in the future, Goldfinch does not
believe that any are likely to fail within the next 12 months and none have failed
so far.

Remember,
past performance is not a guide to the future: capital is at risk.

Risks

This is an SEIS investing in the
smallest unquoted companies. It is a high-risk investment.

SEIS investments are illiquid and
capital is at risk. Investors should not invest money they cannot afford to lose.
Tax rules can change and tax benefits depend on individual circumstances.

EIS schemes are currently the subject of a Treasury consultation. This is designed to review the options for ensuring access to long-term investment for young, innovative firms. The proposals are expected to be announced in the Autumn budget. This could have an effect on the investments permitted under EIS, and on the levels of tax reliefs that are available.

Fees

There is an initial charge of £500 on
investment into Goldfinch, charged to the investor.

The annual fee will be 2%, paid by
the investee companies, for a maximum of four years, plus an additional 0.5%
per annum administration fee. There is an exit fee of £30 per company, subject
to a maximum of £300.

A performance fee of 20% is payable
once investors have received £1.25 back for every £1 invested. We like the fact
that this is paid at the portfolio level and not by individual companies. The
manager’s performance fee is aligned with the target return as they only
receive the fee for returns above this level.

Summary

In our view this is a well-run and
compelling media fund with the benefit of SEIS tax relief. The manager is
committed and very experienced. We like the fact that the performance fee is
paid at portfolio level: it shows an alignment of investors’ interests with
those of the manager. For larger investments, the fixed initial charge may also
be attractive. An investment in the Goldfinch SEIS Fund can be used to can
offset the tax relief against this or last year’s income tax bill (via carry
back), as well as being able to reduce capital gains tax by up to 50%. For
those considering SEIS, we think this fund is one to go on the shortlist.

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